Cities ask Monterey County for $2 million in overcharged property tax fees.
Thursday, January 24, 2013
The accounting tricks used to calculate how property taxes are divvied up between state and local governments sound more like gymnastics moves, with the Triple Flip and the VLF Swap.
After the California Supreme Court finalized a decision Jan. 16 on how to interpret those formulas, cities can expect some $40 million a year to flow back from counties.
Starting in 2006, most counties in the state – including Monterey – interpreted the formula regarding how to pay themselves for calculating and collecting property taxes to their advantage. After the Supreme Court decision, Monterey County Auditor-Controller Michael Miller adjusted the formula accordingly. He expects the change to cost the county $420,000 a year.
Five of the 12 cities in the county have banded together to share a $5,000 advisory fee for attorney Michael Colantuono, who represented 47 Southern California cities in a 2008 lawsuit against Los Angeles County.
Those cities lost, then won on appeal. L.A. County, in turn, appealed to the state Supreme Court, which upheld the lower court’s decision. That triggered the return of about $10 million in tax administration fees to the cities.
In Monterey County, the sum is closer to $2 million. But for some cities, it’s a significant chunk of revenue.
Sand City, Marina and King City filed claims against the county earlier this month, seeking $42,000, $221,000 and $74,000, respectively. Colantuono’s other clients, Pacific Grove and Salinas, are also preparing claims.
While it’s too early to know exact figures, P.G. expects to ask for up to about $200,000 and Salinas for about $1 million, according to the city attorneys. The city of Monterey is also preparing to file a claim, according to city legal assistant Lane Hayes, but hasn’t calculated how much yet. Seaside is asking for $253,000, according to Deputy City Manager Daphne Hodgson.
“It’s hugely important to our General Fund,” Salinas City Attorney Vanessa Vallarta says. “This is money that, because of a skewed interpretation, severely impacted us. Especially in the first year , when it was a big, unexpected withholding of close to $150,000.”
Colantuono expects to represent all 12 cities in the county, and he’s predicting an amicable settlement. If there’s no agreement by April, he says, they’ll be prepared to sue.
“I think most counties are going to resolve this without litigation,” Colantuono says. “One of the reasons counties have an incentive to wrap this up very quickly is they pay 7-percent interest.”
Senior Deputy County Counsel Kay Reimann says she’s not yet finished reviewing the Supreme Court decision, and hasn’t decided how the county will respond.
But Miller, the county auditor, is surprised the court sided with the cities, since the interpretation of the fee formula was so widely accepted. “I completely understand that our cities are operating on a shoestring, and the county ourself is in the same situation,” he says. “Doing it right is important.”
Miller’s department, along with those of the county assessor and treasurer-tax collector, will share the $420,000 annual loss.
County Assessor Steve Vagnini will be seeking General Fund dollars to make up for it. “Hopefully the county realizes they have to fund the assessor,” he says, “in order to keep collecting property tax revenues.”